# Acct 505 Discussion question week 4 #2

## Acct 505 Discussion question week 4 #2

Page 3 Prepare a schedule of cost of goods manufactured in the text box below Mark Edmondson 11/24/2012 2:27:18 PM

Direct Materials:
Beginning raw materials inventory \$ 9,000
Add: Purchases of raw materials 124,000
Raw materials available for use 133,000
Deduct: Ending raw materials inventory 11,000
Raw materials used in production \$ 122,000
Direct labor 80,000

Rent, factory building 70,000
Indirect labor 54,500
Utilities, factory 8,000
Maintenance, factory equipment 20,000
Supplies, factory 1,500
Depreciation, factory equipment 30,000
Total manufacturing costs 386,000
Add: Beginning work in process inventory 6,000
392,000
Deduct: Ending work in process inventory 21,000
Cost of goods manufactured \$371,000

Page 8 Number 1 A-D

Baker Company has a product that sells for \$20 per unit. The variable expenses are \$12 per unit, and fixed expenses total \$30,000 per year.

a. What is the total contribution margin at the break-even point? The contribution margin at the break-even point is 30,000 because it is the total fixed expenses per year.
b. What is the contribution margin ratio for the product? The contribution margin ration for the product is 20-12=8/20=40% The way we calculate this would be sells for \$20 per unit minus the variable expenses \$12 per unit divided by the sells for \$20 which would equal the 40% ratio.
c. If total sales increase by \$20,000 and fixed expenses remain unchanged, by how much would net operating income be expected to increase? 20,000*40%=8000. The net operating income would be 8,000 we calculate this by 20,000 which the total sale increase and the 40% which is the contribution margin for the product and that is how we got the net operating income.
d. The marketing manager wants to increase advertising by \$6,000 per year. How many additional units would have to be sold to increase overall net operating...